As of March 13th, President Trump declared a federal state of emergency in response to COVID-19, and in that student loan interest is waived. Many are left wondering How to Manage Student Loans During COVID-19. The CARES Act clarified that no federal student loan payments would be due between passage of the bill and September 30th, and that interest would not accumulate on those loans. This post is going to dive a little deeper and look at exactly what this means for you if you have a student loan, and what you should be doing between now and September 30th.
Should You Refinance Again?
Remember, this is only for federal loans. If you’ve already refinanced your loans, you no longer have federal loans – they’re now considered private loans. Additionally, the government just cut interest rates, so now could be a great time to refinance again. If you’re able to get a lower interest rate on your private loans, then it’s a no brainer – refinance.
What Does Federal 0% Interest Mean?
The federal 0% loan interest rate is automatic. Technically it went into effect on March 13th by executive order. So when it’s all done, you will have experienced 6.5 months of 0% interest. The only downside to this is the notorious bad customer service of federal loan companies. If you can take advantage of the 0% interest, definitely do so, but be prepared to refinance before the expiration date.
What is the Tax-Free Employer Paid Student Loan?
Another part of the CARES Act allows your employer to pay up to $5,250 of your student loans, take a tax deduction for it, and provide it to you as a tax-free benefit. Ask your employer about this option, as it could work out for you both. If you are self-employed, you may also qualify for this benefit.
Will Companies Match the Federal Rates?
If you’ve been doing the right thing, managing your loans well, minimizing your interest, you’re probably frustrated that you’re missing out on the 0% interest opportunity. It doesn’t feel fair that the government is waiving interest/payments for those with federal student loans but doing nothing for those with private loans. Unfortunately, companies can’t match the government at 0%, or they would fail and need money from the government to stay in business. You may, however, find some very competitive rates if you shop around. The 0% rate is nice, but it’s not going to last, and everyone who is enjoying it will be rushing to refinance once it ends.
Do Companies Have Hardship Programs?
Yes, many companies have economic hardship programs that allow you to not make payments for 2 to 12 months. If you are out of work and short on funds, be sure to talk to your lender about your situation. Interest will still accrue, but at least it’ll be accruing at a low rate. As soon as the economy opens up, there will be a lot of opportunities to get back to work. Hopefully, these tips help you in knowing how to manage student loans during COVID-19.
